Southern Cross Electrical Engineering (the Plaintiff) and Steve Magill Earthmoving (the Defendant) entered into a Subcontract whereby the Defendant would perform excavation and trenching works (the Works). The Subcontract was a construction contract for the purposes of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Security of Payment Act).
The adjudicator provided his determination, finding that there was $400,158 inclusive of GST owing to the Defendant.

In reaching his determination, the adjudicator dealt with the factual dispute between the parties and assessed the relevant evidence and held:
At [70] ‘Based upon the information provided to me, the respondent has not convinced me that no variation was agreed or that the claimant has over-claimed for the work that is the subject of the respondent’s challenge. I determine that the amount sought by the claimant in its payment claim for this issue is validated, that is, 6,948 linear metres for the HV item including the extra width lengths, and 27,163 linear metres including the extra width lengths. Together this amounts to $716,331 based on $21 per linear metre’.

The Plaintiff filed a summons, seeking a declaration that the determination is void on the basis that the adjudicator erred in expecting the Plaintiff to disprove the variations and that the determination was unreasonable.

ISSUES

i. Whether the adjudicators determination is void by the adjudicator ‘wrongly imposing an onus on the Plaintiff to prove (to his satisfaction) that there had been no ‘variation or change to the scope of works’ required under the subcontract; and

ii. Whether the adjudicators determination was so unreasonable that it did not comply with the requirements for validity under the Security of Payment Act.

FINDING

In assessing the first issue of onus, McDougall J considered that the full requirements set out by Vickery J in SSC Plenty Road Pty Ltd v Construction Engineering (Aust) Pty Ltd, were not required in each and every case but rather, each case is to be assessed by ‘the adjudicator looking at all of the material presented by the parties and making a determination by being satisfied that the claimant has made good its claim’.

In assessing the second issue of unreasonableness, McDougall J found that adjudicators have significant discretion when reaching a determination.

McDougall J noted that adjudicators are not necessarily legally trained and the courts must not exceed their supervisory role by intervening in an adjudicators decision, unless it is found that there is a jurisdictional error or that the decision made is one that no reasonable person could have made.

QUOTE

McDougall J held that:

[34] Another point to bear in mind is that the reasons given by adjudicators for their determinations are not to be analysed closely and parsed pedantically, with a predisposition to discerning error. That has been said, in substance at least, on many occasions

[37] When the adjudicator said at [70] that Southern Cross had not convinced him that no variation had been agreed, that should be read, in my view, as saying no more than that Southern Cross had not adduced evidence to counter the inferences that, quite clearly, the adjudicator thought was otherwise available, as he put it, “upon the information provided to [him]”. The choice of words in [70] may be a little unfortunate, but I do not think that the adjudicator’s reasons on this point should be read as saying, in substance, that Earthmoving was entitled to succeed simply because Southern Cross had failed to convince him that this should not happen. To read that part of the reasons in that way is to ignore its context, both within the reasons themselves and within the framework of the whole dispute and the material that the adjudicator was required to consider.

[55] The court must not use the concept of reasonableness to disguise an inquiry into the merits of the decision. As Hayne, Kiefel and Bell JJ put it in Li [18] , there is an area (denoted by the concept of reasonableness) within which the decision maker has a genuinely free discretion. The courts must not exceed their supervisory role by intervening within that area. In the context of the Security of Payment Act, that principle finds expression in, or helps to justify, the proposition that mere error of law, not resulting in or associated with jurisdictional error, does not entitle the court to intervene [19] .

IMPACT

This case highlights that in assessing an adjudication determination under the Security of Payment Act, the Courts may take a more lenient approach to the rigor which must be demonstrated in a valid adjudication, but contract managers should ensure that each aspect of the claim is well supported in any adjudication application.

Valeo Construction Pty Ltd (the Plaintiff) and Pentas Property Investments Pty Ltd (the Defendant) entered into a contract whereby the Plaintiff would construct a five-storey residential apartment building, with two levels of basement car-parking and some commercial tenancies at 178 Victoria Avenue, Albert Park (the site) in Victoria, for a total sum of $18,490,170.00 (exclusive of GST).

Pursuant to the Contract, the plaintiff was entitled to make claims for payment under s.9 of the Building and Construction Security of Payment Act (2002) Vic (the Act) on the fifteenth day of each month, by serving a payment claim on the superintendent. The parties then agreed to modify this orally, and it became the thirteenth of the month
The plaintiff sent a payment claim #45 for the total sum of $2,215,150.03 to the defendant and the superintendent.

The payment claim was then revised, resulting in a $25,000 increase, totalling $2,215,150.03 and was emailed to the defendant on 1 March 2018

ISSUES

• Validity of the Revised Progress Claim pursuant to s.14 of the Act

• Whether s.14 of the Act is silent on the revision, or withdrawal and replacement, of a payment claim – allowing subsequent rectification.

• Whether a revised progress claim, effected service of a valid progress claim which revised or updated or withdraw or replaced or effected a reasonable correction to the original claim or when read with the original claim constituted one in the same payment claim as with the original progress claim

FINDING

Digby J considered the scheme of the Act, and determined that the service of a payment claim for a claimed amount is a trigger for the procedures provided for in ss 14 and 15 of the Act, including in respect of the prescribed form and timing of the payment claim served pursuant to s.14(1) of the Act and the negative stipulation in s14(8) that a claimant cannot serve more than one payment claim in respect of each reference date under the construction contract, fixed by s9(2) of the Act’ is valid, unless express notification is given of the withdrawal of the first payment claim.

Digby J referred to Southern Han Breakfast Point Pty Ltd (in Liquidation) v Lewence Construction Pty Ltd, where the High Court of Australia has expressly approved the proposition contained in the decision of the Court of Appeal of New South Wales in Dualcorp Pty Ltd v Remo Constructions Pty Ltd that a subsequent document purporting to be a payment claim, that is in respect of the same reference date as a previous payment claim, is prohibited from being recognised as such under the Act.

QUOTE

Digby J held that:
[63] “In my view, as a practical observation, it could be problematic for respondents to payment claims, and their advisers, if it was valid and effective for a payment claim to be revised or amended or corrected after initial service, by means of the service of a subsequent payment claim in relation to the same reference date, unless the earlier payment claim served is clearly abandoned or withdrawn prior to or contemporaneously with the revised or amended or corrected subsequently served payment claim in respect of the same reference date”.

[64] “If it were otherwise, difficult issues would be likely to arise as to what the nature or extent of a permissible charge might be and as to when under the relevant construction contract and the Act, such a charge could be made to a payment claim earlier served”.

[65] “Undesirable issues and uncertainties could also well arise as to the implications, if any, in relation to the time within which a responsible payment schedule must be provided under the Act and in addition such a change, or possible multiple changes at different times, could unduly burden the respondent, and its consultants. Such issues would be likely to vex the parties to applicable construction contracts, contract administrators and the courts”.

IMPACT

The case highlights the importance of clarity in initial service of a payment claim, and if an amendment or revised payment claim is to be served, the previous payment claim needs to be expressly abandoned or withdrawn in respect of the same reference date.

On July 2016, the original Tribunal dismissed two complaints brought by the Geoffrey Frank Sanders (Sanders) against Gemmill Homes Pty Ltd (Gemmill Homes) and found a third complaint of faulty workmanship to be successful. Sanders sought an order from the original Tribunal requiring work to be performed to remedy the faulty workmanship. Gemmill Homes submitted that due to a significant breakdown in the relationship between the parties that a monetary order was more appropriate. The original Tribunal accepted the submission made by Gemmell Homes and made a monetary order in favour of Sanders.

Sanders filed an application pursuant to s 58 of Building Services (Complaint Resolution and Administration) Act 2011 (WA) seeking leave to review each orders made by the original Tribunal.

ISSUES

Two issues were important:

1 The criteria for granting leave – Whether original decision was wrong or attended with sufficient doubt?

2 Factors relevant in exercise of discretion when deciding appropriate building remedy order – Whether remedial order or monetary order appropriate?

FINDINGS

The Review Tribunal found that the original Tribunal had not erred in finding liability on the third complaint, and the decision was not attended with sufficient doubt to justify granting leave to review that decision. However, the Review Tribunal did find that the original Tribunal erred in their approach to determining what was the appropriate remedy to order in favour of Sanders. The original Tribunal also erred in giving weight to the fact that Sanders did not agree with Gemmill Homes’ proposed remedial methods.

The Review Tribunal found that original Tribunal, in exercising its discretion to make a monetary order rather than a remedial order in favour of the applicant, failed to take into account relevant factors including: the owner’s preference to elect a remedial order; the advantages to both parties afforded by a remedial order which are not afforded to them by the making of a monetary order; and that the usual order where a finding of faulty workmanship is made is to require the respondent to rectify those works at [33].

The Review Tribunal also found that there would be substantial injustice done by leaving the decision in respect to the appropriate remedy unreversed.

Leave for review was granted limited to the question as to what building remedy should be made in favour of Saunders on the basis of a finding that the cracking of the cornices was work which was faulty and/or unsatisfactory. All other grounds seeking leave to review were dismissed.

QUOTE

Senior Member Wallace held that:

[31] “The usual practice, built up over considerable time, is to give a builder respondent the opportunity to remedy its own defective work.”

[32] “Those cases where an order to pay has been made by the Tribunal normally occurs at the election of the applicant and on a sufficient basis being established.”

[32] In Nelson v Mardesic (1998) 22 (WA) 42 (Nelson) at [49] “… the Committee cannot compel an owner to elect a particular remedy. The owners have elected to seek an order to pay and they are entitled to it. If the builder had demonstrated that the owners were acting unreasonably in insisting on this remedy, the reasonable costs to which the owners would be entitled under s 12A(1a)(b) [of the Builders’ Registration Act 1939 (WA)] would be the cost to the builder of carrying out that remedial work, but that is not the case on the evidence before us.”

IMPACT

Although particularly relevant to this jurisdiction, Builders and Owners should note the benefit of the Builder rectifying his defects and that this is often beneficial to both parties and favoured by the Courts or Tribunal.

Fitz Jersey Pty Ltd (“Fitz Jersey”) engaged Atlas Construction Pty Ltd (“Atlas”) to design and construct a development project in Sydney. When a dispute arose over final payment, Atlas sought recovery through adjudication. The adjudicator determined that the final payment claim submitted by Atlas for $11 million was payable in full. Fitz Jersey did not make the payment within the required 5 business days, and commenced a Court action to quash the decision. However, it took no steps to stop Atlas from enforcing payment. Atlas obtained and filed an adjudication certificate with the Supreme Court, creating a judgement debt and requesting a garnishee order on Fitz Jersey’s bank.

Shortly before the first hearing to quash the adjudicator’s decision, the garnishee order was granted and served, and Fitz Jersey’s bank paid $11 million to Atlas. As noted by counsel for Atlas at the hearing, “the horse has bolted”. Fitz Jersey sought the return of the money.

ISSUE

Whether correct process was followed to obtain a judgement debt and garnishee order without notifying Fitz Jersey?

FINDINGS

The Court referred to the fundamental application of the Security of Payment Act, whereby Basten JA identified its purpose as providing “a speedy and effective means of ensuring cash flow to builders from the parties with whom they contract”.

The Court found that Atlas was within their rights to obtain a judgement debt, and that the correct procedures were followed to enforce the garnishee order and recover the monies owed. The Court was critical of Fitz Jersey for failing to pay the amount owed into Court at the commencement of proceedings and seek an injunction on that basis.

QUOTE

Addressing the conduct of Fitz Jersey, Basten JA explained the following:
“The conduct of the developer had a dual aspect and revealed a degree of ambivalence. On the one hand, the commencement of proceedings in the supervisory jurisdiction of the Court demonstrated that the developer sought to challenge the validity of the adjudicator’s determination upon which the judgment was based. On the other hand, it had not taken either of the steps available to it, namely, to seek an undertaking from the builder not to take steps to enforce its entitlements under the determination, or to seek interim relief by way of a stay.”

IMPACT

Parties to an adjudication have a statutory obligation to adhere to an adjudicated decision. The Security of Payment Act, together with the availability of Court procedures for enforcement, provides a robust procedure for recovery in the event that a decision is not followed. It is important that both parties consider their rights and obligations under the Security of Payment Act and are aware of their requirements following a decision, and the impact that their actions may have.

The adjudicator had made a determination in favour of Shade Systems in the amount of $277,755.03, and in arriving at that amount had rejected Probuild’s claim for liquidated damages that would have otherwise offset the entire adjudicated amount.

Probuild sought an order quashing the determination on the basis that it involved an error of law on the face of the record. The adjudicator’s reasons indicated that he assumed the onus was on Probuild to demonstrate that the failure to achieve practical completion by the due date was caused by default on the part of Shade Systems. This was held to be an incorrect view of the law.

Probuild successfully argued before the Court at first instance that the adjudicator had made an error of law, and the Court ordered the matter remitted to the adjudicator for further consideration and determination according to law.

ISSUES

Whether adjudication determinations are able to be challenged if that determination has been made on the basis of an error of law that appears on the face of the record of the proceedings.

FINDINGS

Shade Systems appealed on the basis that previous judgements had ruled adjudication determinations unreviewable except for jurisdictional issues. Probuild disagreed, but also argued that even if this was the case, those decisions should be reopened.

The Court of Appeal considered the matter significant and appointed a five-judge bench. It was not contested that the adjudicator had been wrong at law.

The Court of Appeal held
“It is the unanimous view of cases in this Court that both McDougall J in Musico and this Court in Brodyn concluded that relief is not available to quash an adjudicator’s determination on a ground other than jurisdictional error.”

The Court of Appeal did not find sufficient reason to doubt the correctness of this view, and set aside the lower Court orders quashing the adjudication determination.

IMPACT

This decision confirms the position in New South Wales, Queensland, Victoria, and South Australia, where adjudication determinations cannot be challenged other than for jurisdictional error.
It is likely to be persuasive in all jurisdictions except the Australia Capitol Territory where the relevant legislation specifically allows judicial review for errors of law and the Court has the option to remit the determination to the adjudicator.

]]>Builder and Contracts : 5 Tips and Traps for Owner in Victoriahttp://doylesconstructionlawyers.com/casewatch-list/builder-and-contracts-5-tips-and-traps-for-owner-in-victoria/
Sat, 23 Jul 2016 15:06:40 +0000http://doylesconstructionlawyers.com/?p=1116You are required to enter into a major domestic building contract in Victoria, when the total cost is $5,000 or more and you carry out domestic building works which includes building; Repairs; Improvements; Maintenance; Demolition; and/or Removal.

Before you sign a domestic building contract, there are a number of things that you should check.

1. Is the builder registered with the Building Practitioners Board (at the Victorian Building Authority)?

Note that only builders that are registered with the Victorian Builders Association can carry out major domestic building works and enter into major domestic building contracts. You can conduct a search on the Victorian Builders Association website, noting that the results of this search should exactly match the details contained in your domestic building contract and your Building Permit.

2. Is there a domestic building insurance policy?

On a preliminary point note that it is only registered builders who can obtain insurance. Also you should be aware that if the cost of your domestic building works is $12,000 or more, your builder will need to obtain home warranty insurance and provide you with a copy of this policy and your domestic building contract will also need to include details about this.

3. Are these fees included in the contract (or are you aware of them)?

The building fee, which may or may not include the cost of mandatory inspections by the building surveyor and may vary between companies planning permit fees (if your council requires a planning permit)

The lodgment fee paid to the local council for recording purposes

The crossing deposit or asset protection fee paid to the local council and refundable at the end of the project, if no damage has occurred to council property

An inspection fee, a non-refundable fee paid to the council for the cost of their inspection of council assets

A government levy which is a charge when the contracted cost of work is more than $10,000. There are three levies based on the total cost of your building, which also apply to owner builders.

4. What should be included in domestic building contracts?

It must include a full description of the works to be carried out and be accompanied by plans and specifications of sufficient detail so that a building permit can be granted. In addition it should also include the following:

Date of contract

Names and addresses of the parties to the contract

Home warranty insurance

Commencement and completion date

Cooling-off period

Right to access

Implied warranties

Damages

Termination, and

Definitions

Payments

Dates for Progress.

5. What to do when we receive a building contract?

Your builder must give you sufficient time to review your domestic building contract and some builders say that it is the ‘standard contract used by everyone’. You should never sign a domestic building contract and then forward to your builder to do the same.

Additions or deletions from the contract could be made without your knowledge. Always keep a copy of any document signed by you.

We are experienced in this area of law. If you are not familiar with building contracts you would be wise to have an experienced lawyer review it with you so that you have peace of mind about what you are signing.

It may be a simple matter of your lawyer asking the builder to delete some clauses that are not in your interests that may limit your rights or expose you to significant costs.

]]>10 Tips to making a payment claimhttp://doylesconstructionlawyers.com/news-board/10-tips-to-making-a-payment-claim/
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